Obama Administration Should Greenlight Natural Gas Exports

Nineteen different proposals for exporting natural gas are inexplicably awaiting approval from the Energy Department.

The oil tanker Moscow in the Gulf of Mexico, September 12, 2006 (Louis Vest)
The oil tanker Moscow in the Gulf of Mexico, September 12, 2006 (Louis Vest)

In January 2010, President Barack Obama promised to double America’s exports within five years’ time. With eighteen months to go before that deadline expires, the target seems beyond reach. Yet his administration is blocking the surest way of boosting American exports — selling natural gas abroad.

The Department of Energy is considering nineteen different proposals for exporting liquified natural gas, some of which were filed nearly two years ago. Only three applications have been approved in recent years: one in May 2011, another in May of this year and a third this week.

Thirty-four Democratic and Republican senators teamed up last month to urge Obama’s energy secretary Ernest Moniz to speed up the approval process, arguing that the world is “hungry” for American natural gas while “the geopolitical implications of LNG exports are tremendous.”

To bolster their own energy and national security profiles, nations around the world are seeking opportunities to diversify their energy supplies. For the first time, the United States is being recognized as one of their options.

The shale gas revolution in the United States has hugely depressed prices at home. Asian and especially European countries would like to import more — to reduce their own gas prices as well as their dependence on major gas exporters like Russia.

The geostrategic consultancy firm Wikistrat’s Hamid Poorsafar argued in the Atlantic Sentinel last year that the concentration of gas export terminals on the Atlantic coast made Europe the natural market for American exports, also because Democratic legislatures on the Pacific coast are reluctant to facilitate fossil fuel exports.

For years, the European natural gas market has been dictated by long-term contracts linked to oil prices rather than spot natural gas prices, moving away from prices determined on a supply and demand basis. The likelihood of increased American exports to Europe helps the energy security problems of both nations. For the European Union, American imports offer a chance to reduce source risk or the degree of import diversification a nation has. For the United States, a new demand hub will put upward pressure on natural gas prices which are currently at a historic low.

While that may worry American businesses and consumers for whom gas in cheap now, an Energy Department study last year concluded that the benefits of freer trade far outweigh the potential costs. Moreover, at such a low price, unconventional gas extraction risks becoming unaffordable.

Finally, and most importantly, energy companies should be able to export to wherever they want. If they can get a higher price for gas in Europe, why shouldn’t they sell there? It would also help Europe’s economies recover from the sovereign debt crises which should, in turn, raise their demand for American products and services.

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